...little blue pills
Friday, July 17, 2009 at 06:46AM We’ll keep it tidy into Friday’s trade as there is not much we can say, we haven’t said the past week or this month at lows. We’ll ignore the Roubini wire cross (later rebuffed) that was credited with the 130pm lift off. We saw other positives earlier (neg headlines..NOK EPS shrugged off, CIT noise again muted) and just before the wire cross (FDX exploding over 200ma). Besides, what anyone says at this point is irrelevant to us!. Why?. We’ve believed one thing and we’ve stuck to not being held hostage since NFP report that brought down the house of green shoot cards and pessimism spread like wildfire..we said starting July 6th…“NFP…only a cautious bump as the world’s economies are not held hostage by one U.S payroll data point. The manufacturing output bounce is still the focus with earnings around the corner to potentially carry weight for the recovery”. So, nobody can say anything about recession, recovery blah blah…to change our minds and how to trade in the meantime. In many respects, our 'The Premise' trading methodology is stll holding true from late March. If we had swayed any with the market pessimism at/near July lows, we wouldn’t have said what we said in (DJIM #28) and therefore, prepared for what has ensued this week.
A side note...It’s interesting and a good exercise to go back now to around July 6th and see how things played out… a standard correction of 10% on the dot to 869 the day after we noted such, the 2nd re-test of 869 mid day soon and that ‘Golden Cross’ thingy. You only learn from experience as with anything and we can only say that we/you will and always respect some of these historical/ technical lessons 1-10-20 years from now. One thing is to read hundreds of pages on trading, another is to experience to them first hand!. Speaking for myself (Demi), I’ve never touched a trading book,…just picked up pieces off the street you can say, including off Jon and BT. It’s the StreetSmart's trading book you can say, you’ll probably become a better trader off a psychology book(s) than any trading book(s).
So..what we’ve seen this week is corporate reports not being hostage by a single July NFP report. Why would they be? Think about it logically. The reports keep coming in solid as witnessed AMC today. It’s been a steady stream. China GDP didn’t slow down last night because of NFP, did it?. The breadth of the market has been a key to watch on this move, 4th impressive ratio today. Performance anxiety(PA) pill is working!!. Strong equities= weak $USD= commodity linked trade (even though, we think coal linked are due for a whipping down the road because of energy divergence). Of course, China data helps commods as well. Only slight negative is the move in afternoon was a SPY-ETF's-SPX fut motivated move with little participation from individual equities, but on the other hand individual stocks should digest some of these gains.
Oh boy...would we love a pause, a pullback now, but the market is overdosing on those little blue (PA) pills and wants to go all night and day, so who knows! We'd continue to love our techs on some weakness from last Q..notably STEC boom boom today..RVBD, STAR. So far in this Q, ININ , didn`t need to consolidate as it's got caught up in the mkt tape, we had CSIQ in forum premarket at 13 pop 8-9% for a quick trade. HITK , only drawback is its a pharma and those usually dont' have a earning momo' shelf life, but in this market going forward, you may well be able to sell " **** in a shoebox" and get away with it. We'll see. Anyways, we're going to be more selective now (go earnings plays forward or scattered fast trade ideas like CSIQ) and go bigger in size on less plays to take advantage of the exuberance. This way any real market quick downturn here will not include our cash profits. Simply, if we get a small cap earning surprise, it should not matter to that stock if the market is down 300 pts at the open or AMC when it's report is released.
Unfortunately, if mainstream media-analysts get bullish now, we'll have PA investors jumping on the bed, climbing, chasing the SP names and so who knows how fast this emotional trading takes to break 956. Most importantly here to us is the mood has changed!!. This is all we ask for going forward as summer lows might not even be 869, but higher at that 884SPX futs level we busted the other day. A good mood will pay dividends to what we eagerly await and that is the best part…micro small cap earning play possibilities, which will slowly start to come out as we go into July end.